The US agreed not to raise the 10% tariff rate on $200 billion
worth of Chinese goods to 25% on January 1, as originally
scheduled, while in return China committed to buy a "very
substantial amount" of agricultural, energy, and industrial goods
from the US.

But what are analysts saying about the agreement? Business
Insider took a look at notes released by major research houses,
investment banks, and asset managers since the deal was struck
Saturday evening. Check out 10 of the best below.

"A bumpy ride ahead": Li-Gang Liu, economist at Citi

source

REUTERS/Lucas Jackson

"The result is better than the market expected, but the huge
divide remaining continues to suggest a bumpy ride ahead," Liu
said.

"Comparing the official statements, we find that the US stresses
more on China's structural reform issues on forced technology
transfer, IP protection, non-tariff barriers, cyber intrusions
and cyber theft, services and agriculture, while China continues
to highlight its willingness to increase imports from the US to
reduce the trade imbalance as well as open its markets wider for
foreign participation."

"The effects of a truce period should provide investors some
relief near term from the day-to-day concerns that have roiled
the markets on the risk of a protracted trade war and the damage
it could cause to global economic growth and corporate earnings
over the course of the next year.

"The hope is that both sides will make good use of the truce
period to find resolution to the trade dispute and remove the
negative overhang that has held international equity market
performance hostage since the summer."

"Rough patches ahead": Hisao Matsuura, equity strategist at Nomura

source

Thomson Reuters

"At the same time, the deadline for the new trade talks has been
set for 90 days. We
think talks between the two countries are likely to hit some
rough patches as the
negotiations actually get under way."

Looking forward, Nomura says the start of 2019 could be rocky for
the markets with Brexit and company earnings helping add to the
uncertainty around the trade war.

"We think the time limit of 90 days for the trade negotiations
will only serve to heighten the chances that stock prices will
weaken," the bank said.

"To be sure, underlying problems remain unresolved. It is not as
though existing tariffs are on the verge of being unwound. But
what Xi has managed to extract from Trump is a stay on any
escalation for three months. That interlude should see a stronger
effort to set a framework for more talks and quid-pro quos.

"However, I remain mindful of the broadening bi-partisan
skepticism on the US end about its worsening relationship with
China. The Chinese views are also coalescing around the notion
that the US will simply not tolerate another nation to rise, to
the extent where US hegemony in Asia can be seriously challenged.

"The three-month extension must therefore be seen in the context
of the 'promise fatigue' of the US authorities and Chinese
wariness about eventual conflict (if not outright hostility)
becoming inevitable."

Risky assets including Chinese stocks are set for a bounce: Daniel Waldman, strategist at UBS

source

Reuters

"We have shown previously that risky assets (especially
outside the US) have priced a substantial risk premia related to
trade risks. This premium is unlikely to decline to zero, as
markets will likely wait for more details and progress on the
negotiations, but some relief should support risky assets,
including our long China A-shares versus EM-ex China Top
Trade.

"Along similar lines, global yields can rise in response,
but the increase in US back-end yields (and particularly real
yields) should be capped by generous valuations and some loss in
growth momentum."

"Signs of rapprochement between China and the US is
certainly
good news. This does not reflect a definitive shift in
the relationship between the US and China, but the opening up of
negotiations is certainly a big step in the right direction.

"We expect the trade war issue to come back on the table as both
sides still seem far away from a fully settled position. However,
for now, we expect markets to reject some of the more extreme
scenarios which have been weighing on sentiment, which will be
reflected in asset prices."

"If recent developments result in an eventual de-escalation of
trade tensions, we see some modest upside risks to global growth.
To be sure, this easing of trade tensions will have a more
material impact on China and its partners in the supply chain,"
Ahya wrote.

"For the US, the growth impact is likely more muted. If the
easing of trade tensions were to be sustained, this would help
lift business confidence and capex in both US and China, and we
project that global growth could be higher by ~10bps than our
base case projection of 3.6% for 2019."

Striking a real deal on trade in 90 days is "a near-impossible task": Ian Shepherdson, chief economist at Pantheon Macroeconomics

source

Reuters

Striking a real deal on trade in 90 days is "a near-impossible
task," Shepherdson wrote.

"We expect the deadline to be extended again in due course. The
lesson of Saturday night is that both sides want to avoid
catastrophe, but neither is hurting badly enough-yet-to make
substantial immediate concessions."

It could also, he adds, push the Fed to change course.

"Looking a bit further ahead, the step back from the brink means
that the Fed is less likely - we can't say for sure, because
anything could happen in the trade negotiations over the next
three months - to have to face the awkward question of what to do
if the imposition of tariffs on consumer goods simultaneously
drives up core inflation sharply and depresses economic growth."

"There are significant gaps between what the US thinks China has
agreed and what China thinks the US has agreed," RBC said.

"A lot will depend on developments in the next 90 days, but given
the US and China are on different pages, we don't think the
optimism can last. We reiterate trade wars need to be framed in
terms of who hurts the least and see the G20 meeting as a
stronger win for the US.

"China buys 3 months before tariffs on $200bn in goods rise to
25% while the US knows it will have a deal with sizeable China
concessions in 90 days, or it will go ahead with tariffs having
cleared the backlog of harvested agri crops. If China doesn't
immediately deliver on that front, the US can easily claim an out
clause on the 'deal' in bad faith."

"Undoubtedly positive for U.S. Transportation companies": Amit Mehrotra, research analyst at Deutsche Bank

source

REUTERS/Kai Pfaffenbach

"Despite the temporary nature of Saturday's deal, the
announcement is undoubtedly positive for US transportation
companies, with the clear and present perceived risk to US
Transportation stocks being China/US trade.

"As such, we expect transportation shares to more accurately
reflect expected earnings growth, with forward multiples for US
transportation companies contracting at double the rate of the
broader market over the course of this year."